Get 40% Off
👀 👁 🧿 All eyes on Biogen, up +4,56% after posting earnings. Our AI picked it in March 2024.
Which stocks will surge next?
Unlock AI-picked Stocks

Earnings call: Element Fleet Management hits record $1.3B net revenue in 2023

EditorAhmed Abdulazez Abdulkadir
Published 03/03/2024, 21:24
Updated 03/03/2024, 21:24
© Reuters.

Element Fleet Management (ticker: EFN) has announced robust financial results for the fourth quarter and full year of 2023, with record-setting net revenue of $1.3 billion and adjusted earnings per share (EPS) of $1.32.

The company has successfully added 155 new clients, with nearly half being self-managed conversions. Throughout the year, Element returned $345 million to shareholders and is on track to achieve its targets for profitable revenue growth and operational efficiencies by 2028.

Key Takeaways

  • Element Fleet Management reported a record net revenue of $1.3 billion for 2023.
  • The company achieved an adjusted EPS of $1.32, with a significant increase in adjusted operating income.
  • 155 new clients were added, with 45% being self-managed conversions.
  • $345 million was returned to shareholders through dividends, share repurchases, and preferred share redemptions.
  • Strategic initiatives are in place, including a new sourcing presence in Asia and strides in digitization and automation.

Company Outlook

  • Element anticipates net revenue growth of 6-8% in the future.
  • The company reaffirms its 2024 guidance, targeting net revenue between $1.365 billion and $1.390 billion.
  • Adjusted operating margins are expected to be between 55% and 55.5% for 2024.
  • Capital investment requirements should remain steady at around $110 million.

Bearish Highlights

  • A slight miss in the net promoter score target due to titling and registration delays.
  • An expected decrease in gain-on-sale next year, impacting net finance revenue yields.

Bullish Highlights

  • Adjusted operating margin expanded by 110 basis points to 55.3% in 2023.
  • Full-year adjusted EPS and free cash flow per share saw increases of $0.27 and $0.36, respectively.
  • Syndication volume and service revenue are projected to grow, with syndication volume expected to align with origination growth of 11% to 17%.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Misses

  • The net promoter score fell short of the target, primarily due to process delays.

Q&A Highlights

  • The company clarified that originations are a better performance indicator than backlog.
  • A significant backlog is expected to be carried into 2025, with a demand-supply equilibrium projected for Q1 2025.
  • Element is establishing a strategic sourcing presence in Singapore to build relationships with Asian OEMs, which could potentially extend to the US and Canada markets in the future.

Element Fleet Management's earnings call revealed a company in a strong financial position with strategic plans for future growth. The establishment of a sourcing presence in Asia and the focus on digitization and automation are key steps toward achieving their long-term goals. While the company faces some challenges, such as a decrease in gain-on-sale and titling delays, the overall outlook remains positive with confidence in meeting the projected guidance for the upcoming year.

Full transcript - None (ELEEF) Q4 2023:

Operator: Good morning, ladies and gentlemen, and welcome to Element Fleet Management's Fourth Quarter and Full Year 2023 Financial and Operating Results Conference Call. At this time, all participants are in listen-only mode and you’re reminded that this call is being recorded. Following the prepared remarks, there will be an opportunity for analyst to ask questions. [Operator Instructions] Element wishes to caution listeners that today's information contains forward-looking statements. The assumptions on which they are based and the material risks and uncertainties that could cause them to differ, are outlined in the company's year-end and most recent MD&A as well as its most recent AIF. Although management believes that the expectations expressed in these statements are reasonable actual results could differ materially. The company also reminds listeners that today's call references certain non-GAAP and supplemental financial measures. Management measures performances -- performance useful in providing readers with a better understanding of how it assesses results. Reconciliation of these non-GAAP financial measures to IFRS measures can be found in the company's most recent MD&A. I would now like to turn the call over to Laura Dottori-Attanasio, President and Chief Executive Officer of Element. Please go ahead.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Laura Dottori-Attanasio: Thank you, operator, and good morning, everyone. Thank you for joining us this morning. 2023 has been a year of record-setting results that translated into real value for our shareholders. Our team delivered on our growth levers with the addition of 155 new clients for the year, of which 45% were self-managed conversions. We also increased our share of wallet gains across all geographies by 28% over last year. Our sales conversion rates are up and we have a very healthy pipeline. Our sales team drove net revenue to an all-time high of $1.3 billion for the year, and we delivered adjusted earnings per share at $1.32. We returned $345 million to our shareholders by way of increased common share dividends, share repurchases and preferred share redemptions. We generated record revenue results and we continue to have a lot of opportunities for further growth and optimize performance in the years ahead. Additionally, we're making solid strides with our three key strategic initiatives that we shared with you last quarter. You'll recall we committed to centralize accountability for our US and Canadian leasing operations, established a strategic sourcing presence in Asia and advanced digitization and automation. Now with regards to leasing, we're set to be operational by midyear in Ireland, a globally renowned leasing center of excellence. Last week our Head of Leasing, Chris Gittens and I had the opportunity to visit our new location. We met with local officials and spent time with the first five of approximately 70 employees that will work in our Dublin office. I have no doubt that under Chris' leadership that our team will elevate our clients' leasing experience, standardize and optimize their operations and pricing discipline and further maximize the value of our portfolio. Now turning to Asia and establishing a strategic sourcing presence, we recently welcomed our newest executive based in Singapore, who will run this initiative. She has previous experience in fleet management including a strong tech background and a proven track record on strategy development and execution. She brings a wealth of knowledge and expertise about the region and the industry, and she'll undoubtedly be a great asset to Element. With her arrival, we'll expand and improve our clients' access to new vehicles and further provide our business with the economic benefits of sourcing at scale. And given Asia's global leadership position in the development and production of EVs, this aligns perfectly with our clients' commitment to sustainability and decarbonization. Through these initiatives we do remain on track to deliver the profitable revenue growth and operational efficiencies that we committed to last quarter, which was on a run rate basis generating between $40 million to $60 million of revenue and $30 million to $50 million of adjusted operating income by 2028. And with regards to our third strategic initiative to advance digitization and automation, as I shared last quarter, we added strong expertise to our team with a new Chief Digital Officer and a new Chief Information Officer. Their mandate is to elevate the client experience deliver more data-driven insights and simplify the complexities of managing large-scale fleets. Their work will help us increase our client net promoter score. This year, while we did make progress moving our score from 39 to 41, it was slightly below the bar that we raised for 2023. So we're going to continue to challenge ourselves by raising expectations further. And so for 2024, we set our targeted client net promoter score at 50. As the EV, mobility and connectivity landscape evolves, accelerating our digital user experience and automating how we serve is an imperative to further optimize our operations, enhance our client-centric business model and accelerate future growth prospects. In the year ahead, we will build on our momentum with a client-centric approach and a sharp focus on our key initiatives to position Element for a sustainable future, one that delivers long-term value creation for our shareholders. And with that, I'll hand it over to Frank to cover the financials.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Frank Ruperto: Thank you, Laura, and good morning everyone. Looking back at 2023, we delivered another record-setting year for Element. These results also reaffirm our continued commercial success and provide us with the financial flexibility to invest in our business and return capital to shareholders in 2024. Before diving into 2023 results and achievements, I'd like to draw attention to three notable reporting items. First, we continue to call out the nonrecurring setup costs in connection with the strategic initiatives in leasing and sourcing that we announced last quarter. Q4 and 2023 included $14.6 million and $18.5 million respectively in such onetime items. We anticipate that the vast preponderance of the estimated remaining $12 million will be completed by Q2. By excluding onetime revenues of $25 million in 2022 and onetime cost of strategic initiatives of $18.5 million in 2023, these adjusted figures provide a more accurate picture of our underlying performance. As such, the growth measures I cite on today's call will be on an adjusted basis. Second, to simplify and streamline reporting, commencing this quarter we are reporting our financial results both as reported in accordance with IFRS and as adjusted which are non-GAAP financial measures. Last evening's MD&A and earnings release included a comprehensive reconciliation between the two. Third, starting next quarter, we will transition all our financial reporting to the US dollar, further enhancing our financial reporting process. In anticipation of this transition, we have prepared unaudited quarterly financial highlights for both 2023 and 2022 in US dollars, which are available in the supplementary information on our website, as well as a comparison of growth rates and margins between our reported figures, constant currency and US dollars, all on an adjusted basis. Additionally, we have provided our 2024 guidance in US dollars. The decision to transition to US dollar reporting is supported by the fact that over 60% of our revenues are derived in US dollars. This change will significantly reduce the impact of currency fluctuations on our reported earnings relative to our current Canadian dollar reporting. Despite this change, Element will remain a Canadian company listed on the TSX with its shares quoted in Canadian dollars. With that said, let's now turn to our 2023 results in Canadian dollars. We delivered record-setting results for revenue, services revenue, adjusted operating income, adjusted operating margins, adjusted EPS and adjusted free cash flow per share. Net revenue grew 16.9% year-over-year, led largely by a 19% year-over-year increase in capital-light services revenue. Positive operating leverage contributed to adjusted operating income of $715.8 million in 2023, delivering an adjusted operating margin of 55.3%. Adjusted EPS grew $0.27 to $1.32, while adjusted free cash flow per share increased 27.5% to $1.67 per share. Growth in capital-light services revenue, outpaced overall net revenue growth during the same period. The growth in services revenue can be attributed to several factors. The increased penetration and utilization rates from existing clients; higher origination volumes; and furthermore services revenue is also benefiting from the addition of new clients with higher services attachment rates. We expect services revenue to continue growing in the low double-digit range supported by enhanced commercial efforts and growing originations from strong client demand as OEM production capacity and prior supply chain constraints are showing increasing signs of normalization. We grew net revenue 15.6% year-over-year, which was driven by growth in net earning assets resulting from increased originations across all geographies, higher gain on sale and growth in higher-yielding assets in Mexico. This growth was partly offset by higher year-over-year interest expense in connection with increasing credit spreads in 2023. Remember, we are protected to base rate moves given our lease contracts and matched funding. That said maintaining access to diversified sources of cost-efficient capital is strategically important. During 2023, we made the strategic decision to increase our liquidity given the significant increase in forecasted originations. As a result, we ended the year with $6.4 billion of committed undrawn liquidity across various funding facilities. We expect modest net financing revenue growth in 2024 due to expected growth in net earning assets. The yield on net finance revenue will moderate in 2024 due to a decrease in gain on sale, increased credit spreads on terming out our debt, higher standby costs associated with our enhanced liquidity position as well as the redemption of the preferred shares with term debt thereby moving the associated costs from below the tax line up to the interest expense line. Now let's delve into the second pillar of our capital-lighter strategy: syndication. We grew 2023 syndication revenue 7.3% year-over-year on record volumes of $3.4 billion. Syndication remains an important funding mechanism for us providing convenient access to cost-effective off-balance sheet capital. Looking ahead, we anticipate modest growth in syndication volume for 2024 roughly consistent with our growth in originations. Moving on to adjusted operating expenses for the year. We saw year-over-year growth of $70.8 million or 14% to $578.3 million, 2.9% lower than our net revenue growth and consistent with our expectation of growing revenues faster than expenses. This increase can be attributed to several factors including higher depreciation and amortization from prior capital investment in our business, higher wages in connection with ongoing investments in our people and our businesses that are expected to accrete to long-term growth and general cost inflation. Wage increases and depreciation accounted for 30% of the year-over-year increase. The remaining year-over-year increase reflects our ongoing investments in commercial capabilities with net revenue contributions more than outpacing these investments. This has contributed to a 110 basis point expansion in our adjusted operating margin to 55.3% in 2023. We will continue to invest in our business to ensure we are well positioned to exceed the expectation of our clients and position Element for continued expected net revenue growth of 6% to 8% in the future. Full year adjusted EPS were $1.32 per share, a $0.27 increase year-over-year and full year adjusted free cash flow per share was $1.67 a $0.36 increase year-over-year. Adjusted free cash flow per share was positively impacted by higher originations and the positive cash flow benefits that come with them as well as lower cost to acquire new business. We've returned a total of $229.8 million of cash to shareholders through dividends and buybacks of common shares this year and $344.8 million to all shareholders which is inclusive of our $115 million Series A preferred share redemption in Q4. We reaffirmed our 2024 guidance provided last quarter and we remain confident in our ability to deliver on this guidance. To recap, we expect full year 2024 to deliver the following financial results in Canadian dollars: net revenue of between $1.365 billion and $1.390 billion; adjusted operating margins of 55% to 55.5%; adjusted operating income of $750 million to $770 million; adjusted EPS of between $1.41 and $1.46; and free cash flow of $1.75 to $1.80 per share; originations between $9.5 billion and $10 billion; and a modest increase in share count as our convertible debentures convert into approximately 14.6 million common shares. We have also provided the US dollar equivalent of the above ranges in our disclosure documents to match our change in reporting currency beginning in Q1 2024. Before I turn the call back to Laura for closing remarks there are a couple of additional points I would like to address. First, we anticipate total capital investment requirements to remain relatively consistent with 2023 at around $110 million. We expect CapEx to be weighted heavier to growth relative to prior years. Second, our cash tax rate in 2023 was 12.7% and we expect that to increase modestly in 2024 and grow to the OECD minimum rate of 15% over time as previously discussed. This rate is expected to remain well-below our adjusted effective tax rate, which we forecast to be approximately 25% in 2024. With that, I will turn it back to Laura.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Laura Dottori-Attanasio: Thanks Frank. I do want to take a moment to thank our Element team members for their hard work and dedication to our clients and each other. Our people's commitment to delivering a great client experience is absolutely instrumental to our success and as you've seen together we created significant value for shareholders while effectively managing our operating margins. We're investing in Element's future and we look forward to the opportunities ahead. Operator, that does conclude our prepared remarks so we can now open the call for questions.

Operator: Thank you. [Operator Instructions] The first question comes from Geoff Kwan.

Geoff Kwan: Hi, good morning. My first question was I'm just wondering if you can confirm to me on the origination side. So I think it was prior to Q4 2023 when you reported quarterly results, the origination numbers included Armada. But for Q4 2023 and going forward guidance all that other stuff, the originations are now excluding Armada, because if that is correct then if you did report originations including Armada then the originations that you showed in the quarter I think it was $2 billion would have been maybe better than what consensus numbers were. And also is there a number you can give for the Q4 2023 originations that included customers that you're doing originations in kind and whatnot?

Frank Ruperto: Yeah, Geoff. So if you look back at the supplements for the last year on a quarterly basis, we've been reporting ex-Armada over that time frame going forward including our guidance ex-Armada. And so we've done that. So what you see for our guidance this year would be consistent with what is in the supplement over the past year. And we've moved away from reporting Armada, because we view originations as a very good indicator of what your lease revenue and potential syndication opportunity is. And as you know back in 2020 or so Armada started to own their own vehicles. And so that number no longer really impacts our financials materially from an origination perspective. So that's where we would be on that number from that perspective.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Geoff Kwan: Okay. And just my second question was just if you can give an update on the self-managed initiative what the vehicles under management are today and if there's just any anecdotes, color, trends, momentum in terms of the pipeline?

Laura Dottori-Attanasio: Good morning, Geoff. Things are actually looking really good. I mean, I did share in my prepared remarks that when we look at the year 2023, 45% of our new clients were in the self-managed space. So that's looking good. I tell you we have an incredibly healthy pipeline. So that's also looking very promising. We've got higher conversion rates in the self-managed space and we're starting to see, I'm going to say tighter cycle times in terms of converting the clients. So that's all good. So all of that, again, leads us to believe that we should be in a really good position to deliver in 2024. We don't provide, I guess, that detailed breakdown from a VUM perspective, in terms of what falls in what bucket. But I can tell you that, our outlook is very positive from a self-managed conversion possibility perspective.

Geoff Kwan: Thank you very much.

Operator: The next question comes from Graham Ryding with TD Securities. Please go ahead.

Q – Graham Ryding: Good morning. Maybe I'll just stick on the same theme, but just go a slightly different direction. So there's obviously -- in the slides you highlight, a huge opportunity in the self-managed fleet space. What are the typical barriers or friction that's holding back such a big part of the market and they're choosing not to outsource to either yourself or a competitor? Or maybe asked another way. why is there still over 50% 60% of these markets that are self-managed? And because I think you did lay out some pretty compelling points of why they should be converting to an outsourced model?

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Laura Dottori-Attanasio: Yes. Hi, Graham. It's a good question. For the time I've spent with the team, not just meeting existing clients, but even had the opportunity to go on a few pitches, I would say, always a little more difficult when it comes to the self-managed fleet in that a lot of times we're speaking with the fleet managers themselves. And so we're talking to people, telling them that essentially we think we could help them do a better job than they're doing, if they were to do it on their own. And so that is, I'm going to say, the first hurdle to overcome. Fleet managers then, again, the amount of savings they can provide might not always be in that top three expenses that you would see when you're an executive. And so for the fleet manager to take what is a critical operation and to take the risk of outsourcing and there being a mistake, it's a big risk that they're taking. And so what we see or tend to see, are much longer cycle times, where we spend a lot of time with the fleet managers to gain their trust to let them see just what kind of value add we can offer. So, that's why it's a little tougher to get in. And that's why, I'd say, it takes longer if you will to convince someone. And it's also why we see, I'm going to say longer periods of time to grow share of wallet in that we'll usually start with the service. And then over time as we prove our ware, these fleet managers will then look to give us more from an outsourcing perspective. So, it's just a bit tougher to do the convincing if you will. I hope that answers your question.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Q – Graham Ryding: Yes, that's helpful. One more if I could. Can you just – Frank, this will be for you I guess. Can you remind us, why your implied growth in 2024 for free cash flow per share is lower than what you're expecting for EPS growth?

Frank Ruperto: Yes. So I'll say, two things. One is, we have not revised our guidance. We've got one month of results under our belt here, and so we'll look at that when we get to our Q1 earnings. We did end very strongly on free cash flow for the year based on continued strong originations, and a good mix of originations, which increased our free cash flow for 2023 as well. And then additionally, we continue as I referenced in the prepared remarks, to see a modest increase in cash tax rate over the next several years, as we get closer to that OECD minimum rate of 15%. But stay tuned on the overall perspective, in regards to guidance. As I said, we're highly confident in the numbers we have out there, and look forward to talking to you in the first quarter about them.

Q – Graham Ryding: Okay. Understood. Thanks.

Operator: The next question comes from Tom MacKinnon with BMO Capital Markets. Please go ahead.

Q – Tom MacKinnon: Yes. Thanks very much. A question just about the service revenue. It looked kind of flat quarter-over-quarter, just modestly up. You've had some pretty good quarter-over-quarter momentum in the prior quarters. Was there anything that you would call out specific to the fourth quarter?

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Frank Ruperto: No, more seasonality than anything. We've got obviously, the shorter days because of the holidays and the like across the globe. So, that's really the major driver. We continue to see good utilization increases within the business on a year-over-year basis and we expect – would expect that to continue. And as we look out next year we feel good about an estimated double-digit service revenue growth – double-digit plus service revenue growth.

Tom MacKinnon: Okay. That's great. And then Frank, just with respect to your prepared remarks, I think you mentioned that you expect a modest growth in syndication and you said that's consistent with growth in originations. If I look at the growth in originations ex-Armada that you're guiding to a – for 2023 there was $8.5 billion and now you're looking at $9.5 billion to $10 billion for 2024. That's anywhere between 11% and 17% growth. That doesn't sound modest to me but is that – how would you characterize syndication growth...

Frank Ruperto: Modest relative to the growth we had this year in syndication volume is what I would say. We do believe that that syndication volume will be consistent with the origination growth.

Tom MacKinnon: Okay. Good. And with respect to service then that I think you said low double-digit range. Is – what would drive service revenue? It sounds like there's with increased penetration originations and new clients selecting more services. How would you gauge service revenue growth in relation to the origination growth?

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Frank Ruperto: Yes. I guess I would say often that origination growth is somewhat decoupled from service revenue growth because we look at that more from a net financing revenue component of it. We still believe that despite increased originations the fleets that we're managing from a services perspective remain aged quite a bit. And therefore, we believe service revenues will continue to be very strong and it will take quite a long time for those and it will be a gradual decline in the age of those vehicles. So we feel pretty good about where our focus is on service revenue growth from a growth perspective.

Tom MacKinnon: Given that they're aged would you anticipate the growth to be higher than the origination growth or just stick with this low double-digit range?

Frank Ruperto: I would stick with the numbers that we gave you.

Tom MacKinnon: All right. Thanks so much.

Operator: The next question comes from Jaeme Gloyn with National Bank Financial. Please go ahead.

Jaeme Gloyn: Yes. Thanks. Just wanted to get your take on the gain on sale this quarter, again still elevated in line with some of the previous quarters. So what are you seeing there from a pricing and a volume perspective that keeps that gain-on-sale still elevated?

Frank Ruperto: Yes. So what we've seen in ANZ is a moderation in pricing offset by the return of vehicles, so higher volumes in the gain-on-sale and we would expect that to continue next year. In Mexico, where we also have gain-on-sale opportunity we've seen as we've gotten – grown that business more opportunities to take advantage of gain-on-sale in regards to the Mexico assets. That all being said, we are forecasting a decrease in gain-on-sale next year, which would be one of the headwinds that I referenced in regards to our NFR our net finance revenue yields.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Jaeme Gloyn: Okay. Understood. In terms of that net financing revenue did I understand that the – you're guiding to on a dollars basis kind of flattish net financing revenues and that reflects the decline in yields that you're talking about here, offset by the growth in on-balance sheet assets? Am I understanding that correctly?

Frank Ruperto: I would say modest growth in net financing revenues. So low single-digits.

Jaeme Gloyn: My other question somewhat tied together I guess, just wanted to get a little bit more color on the share-based compensation in the quarter increased substantially. Was there anything sort of let's say one-time in there? Or is that reflective of share-based comp that we should expect going forward? And then tied to that, looking at the balance scorecard net promoter scores, if you can sort of dig into the one point increase year-over-year. Is that something – I don't think you're obviously satisfied with but maybe you can dig into some of the factors and drivers that you're looking to deliver to improve that number.

Frank Ruperto: Sure. I'll take the first one on the share-based compensation. So our share-based compensation is very tightly aligned to shareholder returns. In fact, at the executive level it's 100% aligned to total return to shareholders from that perspective. So given the results that we have driven that have increased the stock price up substantially relative to the TSX which is how we measure those returns those LTIP long-term stock comp paid out at a two times multiple of the original grant and we continue to accrue for that. We reset the -- one of the grants up by another 50% given the strong stock price accrual in Q4 as well. So there's a onetime catch-up on that that you do see it but it's wholly driven by total return share price plus dividends relative to the TSX for the vast preponderance of that long-term incentive.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Jaeme Gloyn: Got it.

Laura Dottori-Attanasio: And I'll take from a net promoter score perspective and the balance scorecard. So you're right. We -- again we have given ourselves a higher target at 41 that we slightly missed by and we've increased that target. And so for us it's really about elevating the client experience. I'd say some of the areas that were a little tougher for us this year and why we didn't hit that score related mostly to I'd say our titling and registration where we had I would say longer delays when it comes to getting things done for our clients. And we know that we need to do better in areas like digital and automation just where we can remove a few more pain points and try to get our processes going with shorter delays. But the miss primarily related to titling and registration of the service.

Frank Ruperto: And let me just correct something that I just said. 75% of our compensation is completely tied to stock price performance and dividends so total return, 25% is restricted. So there's no multiplier on that component.

Jaeme Gloyn: Okay. Thank you very much.

Operator: The next question comes from Stephen Boland with Raymond James. Please go ahead.

Stephen Boland: Thanks. My first question is just about the backlog. There was talk that that would normalize to that $800 million range probably in early 2024. It still remains very, very elevated. I'm just wondering as part of the origination increase is that assuming a large decline to the backlog? And in your comments you're saying you're not going to disclose that information anymore maybe on a special basis or something like that. What's the logic of not disclosing that as well? If we can just have a quick comment on that as well.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Frank Ruperto: Sure. So we never disclosed backlog. In fact, it wasn't even a term we've ever used internally because prior to the pandemic because originations are typically 75 to 90 days in the US and Canada and originations are the best measure for how the business is overall performing as supply chains are normalizing and we come down from I want to say somewhere around 220 days in US and Canada down to roughly 150 and it continues to come down we believe that that will be a much better indicator of the performance of the business. All that being said we will carry -- we forecast carrying a significant backlog into 2025 and believe that we will reach equilibrium from a production demand-supply in somewhere in Q1 2025, which will then roll off the rest of the backlog as we move forward here. I'd also add that we continue to see very strong demand from client orders, in-part because of the age of the fleets that we've suggested and the growth of their underlying businesses. So that is what is driving the backlog discussion, as we move forward here.

Stephen Boland: Okay. Thanks. And my second question is just one of your new initiatives with opening the Asian office and going after the OEMs. Can you -- like, can you explain where you're sourcing from maybe new OEMs or OEMs that have production in North America or just Asia? Are those vehicles expected to be moved into North America or Europe? Is it combustion? Is it EV? I'm just trying to get a little bit of sense what -- where the movement of sourcing and where the vehicles end up.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Laura Dottori-Attanasio: Yeah. Stephen, about three quarters of the sourcing that we do today are from the big three OEMs. We do source from others, particularly when it comes to Australia, New Zealand and Mexico. And so for us when we look at Asia and how important they are when it comes to the production of EVs. We think we should have direct relationships with those OEMs as well. And so that's why we're establishing a strategic sourcing presence in Singapore. It allows us to be closer and to develop those direct relationships and as a starting point where we are buying some of those vehicles as I said in Australia, New Zealand and Mexico.

Stephen Boland: I see. And do these OEMs have production capabilities in North America? Because we read articles about -- that the OEMs in Asia have a major price advantage than the ones in North America or the domestic OEMs here. I'm just trying to get at is that the ultimate goal is just to move it into Europe or move it into Australia? Or what's the future for these OEMs in North America?

Laura Dottori-Attanasio: Look, I think the future remains to evolve. The vehicles that we mostly serve our -- to our clients are not produced by some of these manufacturers in the US or in Canada. That could change overtime. When we look at things today some of these manufacturers we'd like more direct relationships with do provide vehicles into the Australian New Zealand and Mexican markets and that's our first area of focus. And we would like to have relationships early on, so that we're there early as things evolve overtime.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Stephen Boland: Okay. Thank you very much.

Operator: This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.